Smart SpendingSmart Spending

Lawmakers: Airlines shouldn't pocket taxes

Rather than passing the savings to customers when the FAA temporarily stopped collecting taxes on tickets, the airlines raised their prices.

By MSN Money Partner Jul 28, 2011 12:38PM

This post comes from Kelly Phillips Erb at partner site Forbes.


Just a few days ago, we found out exactly what airlines thought of consumers when, after a lapse in the law allowed travelers to catch a bit of a break, a number of major carriers found a way to turn it to their advantage.


The glitch meant that airlines wouldn't be collecting taxes while the Federal Aviation Administration budget remained unconfirmed. That should have meant reduced fares for travelers. Instead, the airlines kept fares level and pocketed the difference.


Nice, right?


Sadly, travelers seemed to accept the airlines' money grab as inevitable, shrugging their shoulders with a kind of "did you really expect any different?" kind of resignation.


Congress has not been so kind.


Congressional leaders, responding to the airlines, are demanding that airlines either hold the money in trust for the government pending a budget resolution or pass along the savings to travelers. Specifically, Senate Aviation Operations, Safety and Security Subcommittee Chairwoman Maria Cantwell, D-Wash., and Commerce Committee Chairman Jay Rockefeller, D-W.Va., sent a letter to Richard Anderson, CEO of Delta Airlines and chairman of the Air Transport Association, calling for an end to the profiteering:

We are deeply perplexed by the industry's pocketing of passenger tax revenue even though they expired on July 22, 2011. Most of ATA members have elected not to pass the savings along to consumers through reduced ticket prices, but rather have decided to increase the base fare of airline tickets. ... We urge the nation's airlines to put all of the profits that they are making from the lapse of the aviation taxes into an escrow account so that they can be transferred back into the Airport and Airway Trust Fund when Congress reinstates the taxes.

Cantwell and Rockefeller went on to point out that the very airline taxes that have recently (and temporarily) disappeared have been blamed for airline woes and consumer prices:

As we have heard from airlines for many years, these fees, all of which are passed on to the consumer, depress the demand for air travel, hurting the industry's bottom line.

Yet the airlines' rush to now pocket those very fees would imply something different. Post continues after video.

Interestingly, despite the fact that Democrats and Republicans can't agree on a budget, they do appear to agree that the airlines don't deserve to turn this into a loss for customers. Rep. John Mica, R-Fla., told CNN:

I expect airlines across the country to be good stewards of taxpayer dollars. Either voluntarily or through statute or through our next (FAA budget) extension, we'll make certain that the money does go into the trust fund and it isn't pocketed by the big airlines.

There's enough indignation to go around.


Just not by the airlines.


As expected, a public relations defense is being mounted by the airlines as we speak. The Air Transportation Association of America -- the same one that said less than two weeks ago that "hiking aviation taxes would slow economic recovery, further burden customers and cost jobs" -- now seems to take the position that price doesn't really matter.


ATA spokesman Steve Lott said about pocketing the difference: "Customers are not impacted and are paying the same ticket prices they were last week."


Whew. Cause here I was thinking that lower prices might translate into a better economy and benefit customers. I have to stop reading those ATA press releases.


More from Forbes and MSN Money:

Congress is Broke! THe US Voter can fix this!


Congressional Reform Act of 2011

1. No Tenure / No Pension.
A Congressman collects a salary while in office and receives no pay when they are out of office.

2. Congress (past, present & future) participates in Social Security.
All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.

3. Congress can purchase their own retirement plan, just as all Americans do.

4. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.

5. Congress loses their current health care system and participates in the same health care system as the American people.

6. Congress must equally abide by all laws they impose on the American people.

7. All contracts with past and present Congressmen are void effective 1/1/12.
The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.

8. Congressmen and Congresswomen running for Federal Office may only accept campaign contributions from legal US citizens who are registered voters in the state where the candidate resides. Unused funds may not be “gifted” nor used for any other purpose. Unused contributions MUST BE TURNED OVER to their State Treasury. NO OTHER SOURCE OF FUNDING WILL BE PERMITTED.

9. SPECIAL INTEREST GROUP ORGANIZATIONS shall not be permitted to offer or gift or any other form of remuneration to anyone representing “THE CITIZENS OF THE USA.” Pamphlets and reports may be made distributed IN THE USA if they are first introduced to the public.

11. No contributions may be made directly to party organizations by orfrom ANY SOURCE.

12. No contributions may be accepted from ANY non US citizen or ANY foreign country.

12. Presidential Elections shall be funded through the US Treasury, equally, to the final viable Presidential Candidates. All unspent money shall be returned to the US

13. The penalties for breaking the law shall be mandatory prison time, with no parole for any reason. Trials shall take place in the State where the crime was committed and not in congress!


Jul 28, 2011 2:39PM
Can we do the same and hold congress responsible for stealing our social security funds?   Can't we make them get it back by stealing from their pension fund, their salaries, their health program, and all of their perks and put the money into escrow until we can put everyone of them on trial for embezzlement?
Jul 28, 2011 2:23PM
It's just another example of the greedy multi-national multi-million/billion dollar corporations taking advantage of the consumers and the government in order to put more money in their pockets. I'm glad congress is at least looking into this. Will they actually find a resolution? Who knows? I hope it's not just more political grand standing. It would be nice to see our congress actually get something done.
Jul 28, 2011 2:22PM
Since when does a tax liability stop? It didn't stop on Christmas or when the office was closed on the weekends. So why should they stop collecting tax now? It should still be collected and still be sent in. There should be an accounting office that can recieve and post these payments. If a company was to collect tax and not send it in, in otherwords keeping it themselves, well, someone should be going to jail for tax evasion.
Jul 28, 2011 2:29PM
Greedy corporations have almost ruined this counrty. Look at MSNBC and how many companies are owned buy the same parent company. Comcast, GE, NBC, MSNBC, MSNBC Universal have huge ungodly profits. Those profits are coming from the very people that spend money in our economy and they don't have any more to spend or waste. Pricing needs to come down. What ever happend to the FCC? We own the airwaves so how is it that it has become one of the most expensive bills we have every month? If everyone gives up their cell phone, internet and cable there would really be a depression. There aren't very many small companies making it right now at least they would be in good company. Stop corporate mergers. Companies don't need to make billions in profits!!!! People do!!!
Jul 28, 2011 2:21PM
Do you expect anything different from greedy corporations?
Jul 28, 2011 2:46PM

aw comeon...i am flying to fl. from newark next week. these taxes ONLY ADD UP TO ABOUT $ would help my pocket to keep it there but i GUESS THE AIRLINES NEED IT MORE!!! of course that is in addition to the $3,000,000,000 in extra fees they already are taking from us rich folks!!!

please note the absolute positive sarcasm!

Jul 28, 2011 2:48PM

Hey, Congress!


Guess what? You should have thought about that before you greedy jerks took their lobbyist money and deregulated them. Now what? Are you going to fine them so they can pass that on to consumers as well? Sounds like something you overpaid windbags would do!

Jul 28, 2011 3:00PM

I'm glad to hear my favorite airline, Alaska Air, isn't doing this!  Also why aren't people up in arms about American Airlines buying their new planes from

airbus( from England or Europe) instead of a US Co., Boeing?  I , for one will not fly American Airlines again since they do not support the American economy.

Jul 28, 2011 3:11PM
It should be noted that VIRGIN AMERICA did pass along the tax savings to customers! One of the few to actually do the right thing!
Jul 28, 2011 3:42PM

Perhaps congress and the public should take note that Big Business and their Over Indulged CEOs only care about themselves.  Business will gladly OVER TAX the public for their services.


Hey Congress the next time you pass a bill that favors Big Business maybe you should think back on this day.  Of course if you would do you jobs this wouldn't be happening in the first place.

Jul 28, 2011 5:13PM
capitalist! lol yeah, let's ride the horse into the sunset.  The Feds thinks that if they exempt a company from taxation in return that company offers growth, employment, etc... and when the product is sold it gets taxed or rather we get taxed. It is a double edge sword. How about only taxing the rediculous profits corporations make and giving it to the shareholders. That might just curve their hunger for $$ and may actually reduce our rates because they "would hate to just give it away". That's money back in our pocket and the share holders, the true owners of the company, are rewarded for their investment. Ahh, a win win!
Jul 28, 2011 2:42PM
If I tried that with my small business I would not only have to pay the money back I would most likely get hit with a large fine that if left unpaid could get ugly.  Sounds like another illegal business practice overlooked by our government.  Hopefully they can recover or better yet return those funds to the people.  Yeah right !    Nevermind.
Jul 28, 2011 2:57PM

and now a company can spend untold amounts in an effort to elect the next American President, is this a great counrty or what!




Get ready for a currency exchange to the Amero and eventually the Woro.  If business isn't restrained and money contiunes to be what is cherrished most, the worlds economy will be even worse off than we are now. Credit Card Companies, Credit Card processing companies are a unregulated rip off to the American dollar. It's our money, how can it be stepped on so badly everytime it gets handled?

Jul 28, 2011 4:19PM
@Someone (Mike in St. Charles): What you wrote should be printed and distributed to every voter in the country.  The Congress is so out of touch with the rank and file Americans who---to paraphrase from the movie "It's a Wonderful Life"---do most of the living and working and paying and dying in this country.Angry
Jul 28, 2011 3:27PM
We live in a capitalist nation.  To ask American businesses to do anything that impacts their profit margin in an adverse way is both naive and a waste of time. "Shame on you" does not affect the Fortune 500 exec in the Bahamas on his yacht. 

Shame should be on the grandstanding congresspeople pretending they are "deeply perplexed."
Jul 28, 2011 2:46PM
I think Congress needs to go back to regulating the Airlines since they have become so money hungry. Regulating the airlines again will eliminate them charging fees for luggage and possibly for the food they want to charge us when the price of the ticket should include it.
Jul 28, 2011 2:59PM

I think they are missing the main point. The airlines are mainly getting away with it because they did not raise the overall price of the ticket. The consumer is paying exactly the same as before the taxes expired. The main entity being hurt is the government because they are not collecting this tax.


Consumers have come to expect to be taken by the airlines and this really isn't impacting their overall cost of travel. The airlines are taking advantage to make a few extra buck while this is all in limbo and are not obligated to pay the government anything back.


The airlines are correct that "the price doesn't matter." Travelers have accepted every boneheaded nickel and dime fee they can dream up and are still buying tickets and flying. I will not be surprised that when the taxes are reinstated the overall price of the ticket will also rise to reflect the new taxes and the government will be blamed for the increase.


This is no different that what the oil companies are doing with gas prices.

Jul 28, 2011 5:00PM
Somebody should pick up on the song by Howard Jones, No one is to blame. It's perfect!
Jul 28, 2011 3:06PM
Organization and Lobby groups tell Congress what is best for the group and drop a few dollars and we the public get left at the altar.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.